September 11, 2015

What is the state of the retail real estate industry in Russia? 

The retail real estate industry in Russia has been one of the fastestgrowing industries during the recent years. It is important to mention that in 2014, the market in Moscow alone expanded by around 0.9 million square metres of retail premises. Thus, over the recent years, the retail estate industry has nearly reached the average European level of shopping area per person in major Russian cities. 

The number of retail facilities in many major cities is comparable to what we can see in other retail destinations of the world – the competition in this segment is rapidly increasing. That being said, many retail facilities that were built several years ago now require redevelopment in order to become more attractive for customers. At the same time, the focus is moving to regional cities that still lack quality retail areas. Such development projects can be quite effective for investors looking for long-term projects. 

The other issue is transfer of power from landlords to tenants. During the last 10+ years, the market was landlord-oriented and the shift of power has been rather drastic. However, this is a healthy transfer, in the long-term, and the move in this direction will significantly contribute to the efficiency and quality of operations by property owners. 

How will the industry evolve in this region? 

The retail estate industry in Russia today is rather advanced and is subject to the same trends as in any other country. However, I believe that in the next 5-10 years we will see many projects in Russian regions and new shopping formats entering the market, such as outlets that have started to appear in some of Russia’s biggest cities. 

At the same time, the current economic situation will significantly increase the competition, and developers will need to become more effective in order to retain their place on the market. That is expected to result in quite a number of deals and a permanent upgrade of the existing centres. 

In the last 15 years, the Russian retail industry has come a long way from virtually non-existent and to one that includes modern shopping centres that can compete with the world’s best facilities. The level of professionalism of the market players has increased drastically and the market is now very open to new and the most advanced approaches.

The article of Vladislav Zabrodin, Managing Partner at Capital Legal Services (link)

Vladislav Zabrodin   Managing Partner       vzabrodin@cls.ru   Tel.: +7 (812) 346 7990            +7 (495) 970 1090